More than 2.5 million HBO and Cinemax customers are blacked out after AT&T cut off its biggest satellite rival Dish Networks and streaming provider Sling TV in a dispute the Department of Justice claims confirms its concerns that AT&T’s merger with Time Warner (Entertainment) would be bad for consumers.

It is the first time HBO has faced a contract renewal blackout on any platform in its 46-year history. But some groups feel it was predictable, considering AT&T owns DirecTV, Dish’s biggest rival. AT&T acquired HBO’s parent company, Time Warner (Entertainment) in 2018, changing its name to WarnerMedia. Last summer, Judge Richard J. Leon, senior district judge on the U.S. District Court for the District of Columbia gave AT&T approval of that $85 billion merger deal with no conditions, scoffing at Department of Justice claims that the merger would give AT&T undue market power that could be used to threaten competitors by depriving them access to popular cable networks and content or use of those networks in marketing materials to attract new subscribers.

As the DoJ pursues an appeal of Judge Leon’s decision, this week’s blackout seems to add ammunition to the government’s case against the merger.

“This behavior, unfortunately, is consistent with what the Department of Justice predicted would result from the merger,” a DoJ representative told Reuters. “We are hopeful the Court of Appeals will correct the errors of the District Court.”

A statement from Dish Networks harmoniously echoed the government’s position.

“Plain and simple, the merger created for AT&T immense power over consumers,” said Andy LeCuyer, senior vice president of programming at Dish, in a statement. “It seems AT&T is implementing a new strategy to shut off its recently acquired content from other distributors.”

Consumer groups like Public Knowledge also agree.

“In opposing the AT&T/Time Warner deal, opponents — including the Department of Justice — predicted that the newly combined company would have the incentive to withhold content, and would gain stronger leverage in negotiations like this one, ” said John Bergmayer, senior counsel at Public Knowledge. “AT&T stands to benefit if customers, frustrated by missing their favorite HBO shows, leave DISH to switch to DirecTV. Time Warner, as an independent company, did not have the incentive to hold out on HBO content in these situations before the merger. Now, consumers are the ones paying the price.”

Dish is accusing AT&T of demanding the satellite service pay for a guaranteed number of subscribers, regardless of how many consumers actually want to subscribe to HBO.

“AT&T is stacking the deck with free-for-life offerings to wireless customers and slashed prices on streaming services, effectively trying to force Dish to subsidize HBO on AT&T’s platforms,” said LeCuyer. “This is the exact anticompetitive behavior that critics of the AT&T-Time Warner merger warned us about. Every pay-TV company should be concerned. Rather than trying to force consumers onto their platforms, we suggest that AT&T try to achieve its financial goals through simple economics: if consumers want your product, they’ll pay for it. We hope AT&T will reconsider its demands and help us reach a swift, fair resolution.”

On its face, the nationwide blackout of HBO and Cinemax on America’s second largest satellite TV provider could be a public relations disaster for AT&T, depriving customers from accessing premium movie networks for the first time. But AT&T is fighting back in a coordinated media pushback.

In its defense, HBO is claiming Dish was not negotiating in good faith. Simon Sutton, HBO’s president and chief revenue officer: “Dish’s proposals and actions made it clear they never intended to seriously negotiate an agreement.”

“Past behavior shows that removing services from their customers is becoming all too common a negotiating tactic for them,” echoed AT&T.

“The Department of Justice collaborated closely with Dish in its unsuccessful lawsuit to block our merger,” a WarnerMedia spokesman said in a statement. “That collaboration continues to this day with Dish’s tactical decision to drop HBO – not the other way around. DoJ failed to prove its claims about HBO at trial and then abandoned them on appeal.”

As always, customers are caught in the middle. For now. AT&T and HBO are telling consumers to drop their Dish subscriptions and stream HBO and Cinemax online directly from their respective streaming platforms, or find another provider. Dish has told its satellite and Sling TV customers they will be credited on their bill for time they do not receive HBO or Cinemax. Dish is also offering customers a free preview of HDNET Movies.

Oral arguments for the DoJ’s appeal are scheduled to begin Dec. 6. Court documents revealed today the judges that will hear the appeal are: Judith W. Rogers, Robert L. Wilkins, and David B. Sentelle.

What began two years ago as the paid streaming service of Turner Classic Movies and grew into a highly respected catalog of 1,800 critically acclaimed films, has been axed by its new owner, AT&T, because it failed to attract a mainstream audience of subscribers.

FilmStruck was the five-star version of Netflix, a niche-streaming service that curated a vast collection of art house, international, independent, classic, and cult favorite films that was perceived by many critics as an essential treasure trove of films. Among the titles: “Casablanca,” “Rebel Without a Cause,” “Singin’ In the Rain,” “Citizen Kane,” “The Music Man,” “Bringing Up Baby,” “The Thin Man” and “Who’s Afraid Of Virginia Woolf?” from Warner Bros. Other classics included: “Babette’s Feast,” “Blow Out,” “Boyhood,” “Breaker Morant,” “Chicago,” “A Hard Day’s Night,” “My Life as a Dog,” “Our Song,” “The Player,” “A Room with a View,” “Seven Samurai,” “The Seventh Seal,” “Thelma & Louise,” “The Times of Harvey Milk” and “The Umbrellas of Cherbourg.”

Last Friday morning, subscribers received a disappointing email:

We regret to inform you that effective November 29, 2018, FilmStruck will be shutting down. As a subscriber currently on a monthly plan, effective immediately you will no longer be billed for FilmStruck and will continue to have access to the service until November 29.

We would like to take this opportunity to thank you for being a FilmStruck subscriber. It has been our pleasure sharing the best of indie, art house, and classic Hollywood with you. FilmStruck was truly a labor of love, and in a world with an abundance of entertainment options – THANK YOU for choosing us.

If you have any questions please visit our FAQs or email the FilmStruck customer service team at [email protected] You can also manage your account by clicking here.

Thank You,
The FilmStruck Team

Customers were informed all levels of the FilmStruck service were being discontinued. This included the FilmStruck Only Monthly package, the FilmStruck+Criterion Monthly package, the FilmStruck+Criterion Annual package, and the FilmStruck+Criterion Student package. Customers on annual plans will receive a pro-rated refund of the remaining term of their subscription.

“We’re incredibly proud of the creativity and innovations produced by the talented and dedicated teams who worked on FilmStruck over the past two years. While FilmStruck has a very loyal fanbase, it remains largely a niche service,” AT&T’s Turner and WB Digital Networks said in a statement. “We plan to take key learnings from FilmStruck to help shape future business decisions in the direct-to-consumer space and redirect this investment back into our collective portfolios.”

In fact, AT&T has been pressing hard to wring cost savings out of its multi-billion dollar acquisition of Time Warner, Inc., now known as WarnerMedia. AT&T has sent a clear message it will not be in the niche content business.

On Oct. 16, AT&T ordered the closure of DramaFever, a Warner Bros. subscription video on demand service offering Korean dramas.

Last week, the company also announced it was pulling the plug on Super Deluxe, a Millennial-targeted content producer that claimed to reach 52 million 18-34 year olds, with 165 million views across Facebook, Twitter, YouTube, and Instagram. AT&T called Super Deluxe “duplicative.”

The first sign that AT&T intended to be aggressive about changing Time Warner’s media businesses took place at a June “town hall” meeting with new HBO executive John Stankey, when employees learned AT&T was impatient with its newly acquired premium movie channel. Stankey made clear AT&T was gunning to push for major changes at HBO, pulling away from a decades-old format showing movies repeated a dozen times a month and a handful of very expensive, but award-winning TV series. The future of AT&T’s HBO will be closer to a Netflix competitor, releasing enough new shows and original content to attract mainstream audience viewing for several hours a day. To make this possible, AT&T will have to provide HBO with a bigger budget, funded in part from money transferred away from services like FilmStruck.

AT&T sources have leaked word that the company will eliminate most of Time Warner/WarnerMedia’s projects that are not proven major producers of revenue to fulfill promises to Wall Street that AT&T’s acquisition will eventually result in substantial financial growth for investors.

The Criterion Collection

FilmStruck subscribers and some Hollywood critics feel blindsided by the decision to shutter the streaming service. New Yorker author Richard Brody minced no words — “Nothing but contempt for the Mr. Potters who are shutting down FilmStruck,” Brody wrote in a scathing opinion piece.

Among consumers, disgust over the decision ranged from shock from Turner Classic Movies fans over AT&T’s decision to shut down a service showing movies not mired in violence, sex, and immorality, to film buffs disillusioned with Hollywood’s mainstream commercial films left furious over the abandonment of a central depository of independent, high quality cinema.

AT&T believes the next generation of streaming will be much less about putting together collections of old movies or producing niche, low-budget movies and series to appeal to the Netflix crowd. Instead, the next war will be fought over high-budget, high-expectation mainstream movies and series streamed on premium subscription services. WarnerMedia will launch its own paid streaming service in 2019. It will face similar paid services launching late next year from some of America’s largest media conglomerates, including Disney. Among Disney’s planned original productions for its forthcoming service, new episodes of the animated Star Wars: The Clone Wars, a new, premium budget live-action Star Wars series from Jungle Book and Iron Man director Jon Favreau, and shows based on both the High School Musical and Monsters, Inc. franchises.

AT&T will complete its fiber buildout to areas designated to get fiber to the home service by mid-2019, according to AT&T executives.

John J. Stephens, AT&T’s chief financial officer, told investors on a quarterly conference call that AT&T is on schedule to complete expansion of its fiber to the home commitment to 12.5 million new customer locations, a regulator-required commitment imposed on AT&T in return for approval of its acquisition of DirecTV.

“We are getting near the end of our fiber build project, which is basically laying the foundation for stabilizing our broadband and TV business profits in 2019,” added AT&T CEO Randall Stephenson.

AT&T’s expansion has targeted millions of customer locations for fiber to the home service, replacing the fiber to the neighborhood technology AT&T used for several years to support its U-verse service. AT&T officials say its fiber network will reach more than one million new customers during 2018. That network is key to two AT&T initiatives – its emerging 5G wireless service, which requires fiber connections to cell towers, and AT&T Fiber and its broadband offerings — helping boost internet and online video revenue.

“This shift to fiber is beginning to drive IP broadband ARPU growth,” said John M. Donovan, CEO of AT&T Communications, Inc. “The strategic pivot we’re making with video, combined with our execution with fiber gives us the confidence that we will stabilize Entertainment Group [profitability] next year.”

AT&T Fiber is critical to the company’s ability to compete in the home broadband market against cable operators that have recently boosted internet speeds. AT&T’s hybrid fiber-copper U-verse system proved inadequate to match the significantly faster internet speeds many cable operators are rolling out. But AT&T Fiber will not reach all the company’s landline customers. Rural areas are unlikely to ever receive fiber upgrades and AT&T has had long-term plans to scrap its rural landline network, transitioning those customers to wireless voice and internet using AT&T’s 4G LTE network.

AT&T’s Outage Map (DownDetector.com)

AT&T customers across northern Texas suffered a day-long outage selectively affecting television, phone, and internet service after an electrical fire at an AT&T facility in Richardson disrupted service and exposed the phone company’s lack of network redundancy.

Customers noticed the outage Monday morning at around the same time the Richardson fire department was dispatched to AT&T’s switching office at 1666 Firman Drive. Reporters on scene saw smoke marks on the side of the building, and a later incident report detailed an electrical fire that damaged part of the building and the primary and secondary backup electric systems.

An early tweet from AT&T claimed the outage was caused by a direct lightning strike on the building. AT&T has since retracted that assertion and claims the cause of the fire is currently under investigation.

AT&T’s smoke stained building in Richardson.

While causing a nuisance for residential customers, the extended outage caused financial losses for area businesses that rely on AT&T phone and internet services to take orders and process credit card transactions.

ATMs that were in service provided needed cash to spend in area establishments, because credit cards could not be accepted due to the outage.

Some customers wondered why AT&T did not have network redundancy to act as a backup after the fire. AT&T had no comment.

The company does not plan to issue service credits for the outage unless customers specifically ask for one.

Service was restored at around 10:30pm CT.

KTVT in Dallas reports service is restored for most AT&T customers in North Texas that experienced a day long service outage. (2:50)

KDFW in Dallas shows some of the damage a fire in Richardson caused to AT&T’s facilities serving the Dallas-Ft. Worth area. (1:37)

“You’re giving it away… you are giving it all away!” — An unknown Wall Street analyst tossing and turning in the night.

America is simply not paying enough for wireless service. Thanks to dastardly competition introduced by T-Mobile and Sprint (potentially to be snuffed out in due course if their merger gets approved), wireless pricing is no longer a license to print money. Forced to offer one-size-fits-all affordable $40-50 unlimited plans, the prospects to grow Average Revenue Per User (ARPU) have never been worse because you can’t charge people for more service on an “unlimited plan” without admitting that plan is not exactly “unlimited.”

Wall Street analysts, already upset at the thought of carriers spending more than $100 billion on 5G network upgrades, are in a real tizzy about how companies are going to quickly recoup that investment. No matter that some wireless companies have profit margins in the 50% range and customers have paid providers for a service they were assured would keep up with the times and network demand. If there is to be a 5G revolution in the United States, some insist it must not come at the cost of reliable profits — so the industry must find a way to stick consumers with the bill.

It is not common for industry analysts to go public brainstorming higher prices and more customer gouging. After all, North Americans already pay some of the highest cell phone bills in the world, only mitigated (for now) by scrappy T-Mobile and Sprint. Mark Lowenstein, a leading industry analyst, consultant, and commentator, was willing to go public in the pages of Fierce Wireless, arguing “operators should be considering charging a premium price for what will hopefully be a premium service.” That is likely music to the ears of AT&T and Verizon, both frustrated their pricing power in the market has been reduced by credible competition from a significantly improved T-Mobile.

Lowenstein fears the prospects of a “race-to-the-bottom 5G price war” which could arrive if America’s wireless companies offer a credible home internet replacement that lets consumers tell the local phone or cable company to ‘take a hike.’ Since wireless operators will bundle significant discounts for those who subscribe to both home and mobile plans, telecommunications services may actually cost less than what Wall Street was banking on.

Something must be done. Lowenstein:

In mobile, there’s been premium pricing for premium phones. And Verizon Wireless, for a few years when it had a clear network lead, was sort of able to charge a higher price for its service (but not a premium price). But today, there isn’t really premium pricing for premium services. That should change when 5G really kicks into gear.

So how do you extract more cash from consumers’ wallets? Create artificial tiers that have no relationship to the actual cost of the network, but could potentially get people to willingly pay a lot more for something they will initially get for a simple, flat price:

One simple way would be a flat premium price, similar to the “tiers” of Netflix for a higher number of devices or 4K/Ultra HD.  So, perhaps $10 per line for 5G, or $25 for a family plan. Another approach would be more akin to broadband, where there are pricing tiers for different levels of service performance. So if the base 4G LTE plan is $50 per month today, for an average 100 Mbps service, 5G packages could be sold in gradations of $10 for higher speeds (i.e. $60 for 300 Mbps, $70 for 500, $80 for 1 Gbps, and so on). An interesting angle on this is that some of the higher-end 4G LTE services such as Gigabit LTE (and beyond) could get incorporated into this, so it becomes less of a 4G vs. 5G discussion and more of a tier of service discussion.

I would also like to see some flexibility with regard to how one can purchase 5G capabilities. For example, a user might only need those premium 5G features occasionally, and might only be prepared to pay that higher price when the service is being used. Here, we can borrow from the Wi-Fi model, where operators offer a “day pack” for 5G, or for a certain city, location, or 5G-centic app or experience. 5G is going to be hot-spotty for awhile anyway, so why not use a Wi-Fi type model for pricing?

Even better, now with net neutrality in the ash heap of history, courtesy of the Republican-dominated FCC, providers can extract even more of your money by artificially messing with wireless traffic!

Lowenstein sees a brand new world of “app-centric pricing” where wireless carriers can charge even more to assure a fast lane for those entertainment, gaming, and virtual reality apps of the future, designed to take full advantage of 5G. Early tests have shown millimeter wave 5G networks can deliver extremely low latency traffic to customers from day one. That kills the market for selling premium, low-latency add-ons for demanding apps before companies can even start counting the money. So assuming providers are willing to purposely impede network performance, there just could be a market selling sub-100ms assured latency for an extra fee.

The potential of a Money Party only 5G can deliver is coming, but time is short to get the foundation laid for surprise toll lanes and “premium traffic” enhancements made possible without net neutrality. But first, the wireless industry has to get consumers hooked on 5G at a tantalizingly reasonable price. Charge too much, too soon and consumers may decide 4G LTE is good enough for them. That is why Lowenstein recommends operators not get carried away when 5G first launches.

“We don’t want to be setting ourselves up for a WiMAX-like disappointment,” Lowenstein writes. “The next 12-18 months are largely going to be ‘5G Experimentation’ mode, with limited markets, coverage, and devices. Heck, it’s likely to be two years before there’s a 5G iPhone in the United States, where iOS still commands nearly half the market.”

The disappointment will eventually be all yours, dear readers, if Lowenstein’s recommendations are adopted — when “certain milestones” trigger “rate adjustment” letters some day in the future.

Lowenstein sees four signs to start the pillaging, and we’ve paraphrased them:

• Coverage: Wait until 30-40% of a city is covered with 5G, then jack up the price. As long as customers get something akin to 5G one-third of the time, they’ll moan about why their 5G footprint is so limited, but they will keep paying more for the scraps of coverage they get.
• Markets: Price the service differently in each market depending on how stingy customers are likely to be at different price points. Then hike those prices to a new “nationwide” standard plan when 5G is available in the top 20-30 cities in the country. Since there may not be much competition, customers can take it or leave it.
• Performance: AT&T and Verizon’s gotta gouge, but it’s hard to do it with a straight face if your 5G service is barely faster than 4G LTE. Lowenstein recommends waiting until speeds are reliably north of 100 Mbps, then you can let rip with those diamond-priced plans.
• Devices: It’s hard to extract another $50-100 a month from family plan accounts if there are an inadequate number of devices that support 5G. While your kids “languish” with 4G LTE smartphones and dad enjoys his 5G experience, mom may shut it all down when the bill comes. Wait until everyone in the family can get a 5G phone before delivering some good old-fashioned bill shock, just like companies did in the golden days of uncompetitive wireless.

These ideas can only be adopted if a lack of competition assures all players nobody is going to call them out for pickpocketing customers. Ajit Pai’s FCC won’t interfere, and is even subsidizing some of the operators’ costs with taxpayer dollars and slanted deregulation to let companies construct next generation 5G networks as cheaply as possible (claiming it is important to beat China, where 5G service will cost much less). Should actual competition remain in the wireless market, all the dreams of rate-hikes-because-we-can will never come true, as long as one carrier decides they can grow their business by charging reasonable prices at their competitors’ expense.